Pyxis Tankers Inc. — Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2015. The filing is an annual Form 20-F, not a standalone fourth-quarter filing. Financial statements are audited under U.S. GAAP and presented in U.S. dollars.
Business context
Pyxis is a Marshall Islands holding company focused on international product-tanker transportation. At December 31, 2015, it operated six double-hull tankers totaling approximately 216,635 dwt: four MR tankers and two smaller tankers. Five vessels were employed under time charters and one operated in the spot market. The company completed its merger with LookSmart on October 28, 2015 and began trading on Nasdaq under “PXS.”
Key financial metrics
| Metric | 2014 | 2015 | Change |
|---|---|---|---|
| Voyage revenue | $27.8 million | $33.2 million | +19.4% |
| Operating income/(loss) | $(17.5) million | $6.0 million | Improved by $23.4 million |
| Net income/(loss) | $(19.2) million | $3.5 million | Improved by $22.7 million |
| Basic EPS | $(1.05) | $0.19 | Returned to profit |
| Net cash from operations | $5.4 million | $12.4 million | +130.7% |
| Net cash used in investing | $(7.2) million | $(18.8) million | Higher vessel-related spending |
| Net cash from financing | $0.2 million | $9.9 million | Increase |
| Cash and cash equivalents | $0.5 million | $4.0 million | Increase |
| Total assets | $121.9 million | $141.7 million | Increase |
| Total stockholders’ equity | $53.9 million | $54.6 million | Increase |
Daily time charter equivalent revenue increased from $10,466 in 2014 to $13,597 in 2015. Fleet utilization improved from 93.8% to 97.9%, while operating days increased from 1,694 to 2,092. The average fleet size increased from five to six vessels, and the weighted average vessel age was 4.8 years.
Voyage-related costs and commissions declined to $4.7 million from $10.0 million because a smaller portion of the fleet operated under spot charters. Vessel operating expenses increased to $13.2 million from $11.1 million, primarily due to the addition of Pyxis Epsilon. General and administrative expenses increased sharply to $1.8 million from $0.1 million, mainly reflecting the $1.2 million administrative fee under the Head Management Agreement, stock compensation and public-company costs.
Debt principal outstanding was $81.1 million at December 31, 2015, compared with $67.0 million at December 31, 2014. Current and non-current debt, net of deferred financing costs, totaled approximately $80.6 million. Contractual obligations included $81.1 million of loan principal, $8.7 million of estimated loan interest and a $2.5 million related-party promissory note due January 15, 2017.
Material changes versus the prior comparable period
- Revenue benefited from the full-year operation of Pyxis Epsilon, higher spot revenue for Pyxis Malou and improved time-charter rates, particularly for Pyxis Delta.
- Profitability reversed from a significant loss in 2014 to net income in 2015. The comparison benefited materially from the absence of the $16.9 million vessel impairment charge recorded in 2014 for Pyxis Malou.
- Pyxis Epsilon was delivered in January 2015 at a total cost of approximately $32.5 million and financed with a $21.0 million term loan.
- Special survey drydockings for Northsea Alpha and Northsea Beta were completed in 2015 at approximately $0.4 million per vessel.
- The company became publicly listed following the LookSmart merger. Public-company and related-party administrative costs increased materially.
- Restricted cash increased to $4.5 million, reflecting lender liquidity requirements. The company’s required minimum cash balance was expected to increase to $5.0 million as of June 30, 2016.
Guidance, outlook and management commentary
- Management stated that operating cash flows, together with other available resources, were expected to fund projected requirements through December 31, 2016.
- The company intended to expand selectively, primarily through modern MR tankers, and estimated near-term potential acquisition capital expenditures could exceed $25.0 million.
- As of March 10, 2016, five vessels were under time charter and one was operating on spot voyages. Approximately 61% of available fleet days in 2016 were contracted, excluding charterer extension options.
- Management did not intend to pay quarterly dividends in the near future, expecting to retain cash for debt repayment, vessel acquisitions, drydocking, operating expenses and corporate costs.
- Time-charter options included potential extensions for Pyxis Epsilon and Pyxis Theta. Contracted charter revenue at December 31, 2015 totaled approximately $17.1 million, gross of brokerage commissions, for 2016 and 2017.
Risks, contingencies and unusual items
- Product-tanker charter rates and vessel values are cyclical and volatile. Weaker rates could reduce revenue, liquidity and vessel values and could impair covenant compliance.
- The company had previously breached the minimum security covenant on the Pyxis Malou loan at December 31, 2014. In 2015, lenders received additional collateral, including Northsea Alpha and Northsea Beta, and Pyxis became the corporate guarantor.
- Loan agreements contain minimum liquidity, vessel-value, leverage and other restrictive covenants. Breaches could permit acceleration of debt or foreclosure on vessels.
- Debt bears variable interest generally linked to LIBOR. Management estimated that a 100-basis-point increase in rates would have reduced 2015 net income and cash flow by approximately $0.1 million.
- The fleet and operations are exposed to maritime accidents, pollution, piracy, sanctions, environmental regulation, drydocking, off-hire periods, insurance limitations and charterer or manager defaults.
- Ballast-water treatment, emissions and other regulatory requirements could require material future capital expenditures. Management estimated potential ballast-water treatment upgrades of at least $0.65 million per MR tanker for special surveys beginning in 2017.
- The company is dependent on related-party manager Pyxis Maritime, which provides executive, administrative, commercial and other services. Maritime Investors, controlled by the chief executive officer, beneficially owned approximately 93.2% of the common stock as of March 18, 2016.
- A $2.5 million promissory note was issued to Maritime Investors at 2.75% interest. The company also has a merger-related make-whole right that could require additional share issuance or, under specified circumstances, share repurchases.
- Nasdaq notified the company in February 2016 that its stock had traded below the $1.00 minimum bid price for 30 consecutive trading days. Compliance was regained after ten consecutive trading days above $1.00.
- The filing states that management was not aware of material litigation or undisclosed contingent liabilities. Insurance may not cover all operational, pollution or loss-of-hire exposures.
Important facts investors should verify
- Current charter rates, expiry dates, extension options and the proportion of fleet days fixed for 2016 and later periods.
- Liquidity after required restricted cash and minimum cash balances, including the timing of scheduled debt amortization and balloon payments.
- Compliance with vessel-value, leverage and other loan covenants, particularly after changes in tanker values.
- Exposure to spot-market rates, fuel costs, LIBOR and foreign-currency expenses.
- Potential dilution from the equity incentive plan, merger-related make-whole provisions and any future equity financing.
- Related-party management fees, termination provisions, conflicts of interest and the company’s dependence on Pyxis Maritime.
- Future drydocking, ballast-water, emissions and other regulatory capital requirements.
- Whether the 2015 profit is sustainable excluding the absence of the prior-year impairment charge and considering higher public-company, financing and operating costs.